Thursday, July 28, 2011

ILMN - missed opportunities

Yesterday (7/27), $ILMN turned out to be one of the trades of the day. Unfortunately, I didn't get in the trade I describe below. I did get a small profitable trade later in the day, but it's not much to write about.

As I continue to learn, I try to go back and review for any "tells" or setups early in the day, so that I can be prepared the next time I see a similar setup. Here's a 5 min chart of $ILMN about 35 minutes into the day:

ILMN - 5 min chart

Here are a few thoughts regarding the first 20 minutes (first 4 bars):

The premarket low was broken in the first 5 minutes, which was bearish.

The 4th bar resulted in a slightly decending but triple overlapping bar (Tom C. wrote about this in the past)

The VWAP line was above the price action, providing resistance

There was clear support at the $61.50 area

TRIGGER: Sell on break of $61.50, stop above $62.25

And based on the time of the snapshot above (7th bar), here is what I'm seeing:

A nice narrow inverted red hammer

Opportunity to add to this trade (if you took the setup earlier) with a bigger position since stop size is smaller

$61.00 was broken (down to $60.86), the price retraced to test the $61 resistance (went as high as $61.28), and has broken back below $61. In other words, test of the $61 resistance has failed.

TRIGGER: Sell on break of $60.95, stop above $61.20

Final notes:

I would have exited at least half the position on the sharp move down around 10:30.

If you never brought down the stop of the 2nd setup (above $61.20), it never would have been triggered.

In fact, the $60.50 level (a VWAP and Fib level) was never broken the entire day, and the stock closed at $57.33.

Not a bad risk/reward trade. Now if I can only catch one of these every day...